Pricing Models in online advertising

Google Ads advertising is one of the most popular ways to promote a brand via the Internet. When deciding on it, an important issue at the very beginning of creating a given campaign is to choose the appropriate accounting method. In the case of the Google platform, we can use models such as CPC, CPM, CPM, or CPA. But what do these abbreviations mean? Today, we have the answer.  

What are the billing models of advertising on the Internet?

Internet advertising buying models are defined as the systems according to which a given platform (in this case, Google Ads) charges a given advertiser for the display of its advertisement. The very nature of a given solution is often hidden in its name. For example, CPC stands for „cost per click,” which translated means „cost per click,” so in this case, we will pay for the ad when each user clicks on it.

Today, there is quite a lot of diversity in the market when it comes to the types of advertising billing models. Thanks to this, even brands that have smaller budgets for their promotion will be able to choose a model that will provide them with satisfactory results for a given online campaign. 

CPC (cost per click) / PPC (pay per click) — cost per click

The CPC model, or PPC, is one of the most popular billing for paid advertising on the Internet. It represents an advertiser’s cost due to a click on his ad. However, it is worth remembering that we are charged a payment regardless of whether the user, after clicking on the ad, becomes our customer or leaves the landing page without making any conversion. This model is often used when testing new advertising campaigns since in this model, you do not have to pay for each display. Hence, this form of billing is preferred by many companies, as we will be charged only if our ad attracts the audience’s attention and they decide to click on it.

One variant of the CPC model worth mentioning is uCPC or unique cost per click. It means the fee per click is charged only once from a given source, i.e., we are billed for unique clicks on our ad. In Google Ads, on the other hand, you may encounter a version of enhanced CPC (eCPC – enhanced cost per click), which is designed to help us intelligently determine rates using a wide range of signals at auction time, such as browser information, user location or even time of day.

CPM (cost per mile) / CPT (cost per thousand) — cost per 1000 impressions

The CPM model can be literally translated from English as „cost per mile,” which may not be a fully understood term for many. However, ,, miles” in this case will mean ,, thousand”, so we already know that the CPM billing model requires us to pay for every 1000 impressions of our ad, regardless of the number of clicks on it.

It is most commonly used for video ads on YouTube, but also for graphic creatives in display image campaigns, where advertisers are primarily concerned with getting their ad displayed to as many people as possible. The CPM model can work well to achieve high reach and strengthen brand awareness.

In Google Ads, you can also meet with a billing model, vCPM, or viewable cost per mile. In this case, payment is charged when the ad is visible on the user’s screen at least 50% of the time for no less than 1 second in the case of display ads or if it is played continuously for at least 2 seconds in the case of video ads.

CPV (cost per view) — cost per view

A model similar to CPM is CPV, which is a model in which we incur a cost per view of a video ad. A view is charged when a user watches 30 seconds of our video ad (or the entire ad if it is shorter than 30 seconds) or interacts with it — whichever comes first. An interaction is defined as a click on the overlay with a call to action, cards and accompanying banners.

Because of its nature, this CPV model is very popular and readily used in YouTube ads. It will be perfect for image campaigns that build brand awareness.

CPA (cost per action) — cost per action

CPA is a payment model that requires a user to perform a specific action, such as filling out a contact form, signing up for a newsletter or making a purchase. In a nutshell, CPA is an efficiency billing model for advertising campaigns that is closely related to conversion. The advertiser specifies the maximum amount he wants to spend to get a conversion (but we don’t have a guarantee that it will happen), and in this case, he is charged when his recipient takes the action he specified. This way, it nullifies the risk of wasting the advertising budget and shows how many potential customers a specific promotion channel generates. However, remembering that this model is also more expensive than other solutions is worth remembering. 

CPA has several derivative models for buying advertising. We can distinguish here:

• CPL (cost per lead) — in this model, we incur the cost only when our user fills out the form specified by us or leaves our personal information along with consent for later contact (this solution will also work well in the case of building a base for our newsletter). Thanks to it, we eliminate the risk of paying for accidental clicks or ad displays. The cost can vary significantly depending on our industry or even how complex our form is that the user must fill out. The CPL model should work well in insurance, banking or services industries.
• CPI (cost per install)—This model is primarily intended for campaigns promoting mobile apps. Advertisers are charged when a user installs their app. This cost can vary depending on the platform (Android/iOS) or the type of ad itself (banners, full-screen ads, etc.). It also involves a CPD model, or cost-per-download, which means taking payment for downloading a particular digital product, such as a guide, book, or specific file.  
• CPS (cost per sale) — This is a model in which payment is charged when a user purchases a product or service. Because this is a rather expensive billing model, this solution is mainly used for successful e-commerce sites. A similar variant to it is the CPO model, or cost per order. In it, we are charged with payment for each order placed, regardless of whether the user paid it. By choosing this solution, advertising can be billed in two ways. The first is a fixed, specific amount for each order, regardless of the value of the shopping cart. While the second way is the payment of a given fixed percentage of sales.

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Internet advertising billing models – summary

The main task of all the above advertising billing models is to promote your brand’s business online. Many of you are probably wondering which is the best and which is worth choosing when putting up a campaign. It all really depends on your expectations regarding advertising, your budget for this type of promotion, and the advertising creations themselves. Only after analyzing these issues can you match the right billing model to your needs. 

Making a well-considered decision regarding your advertising billing strategy will help you achieve your business goals faster and more effectively, with less risk of burning through your budget. However, if you are unsure which one will be right for you, you can use the services of a marketing agency, which will help you choose the right online promotion channel and match the optimal billing model to your business.